Can any of the company-specific risk be diversified away by investing in both Wesdome Gold and TGS Esports at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Wesdome Gold and TGS Esports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wesdome Gold Mines and TGS Esports, you can compare the effects of market volatilities on Wesdome Gold and TGS Esports and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Wesdome Gold with a short position of TGS Esports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wesdome Gold and TGS Esports.
Diversification Opportunities for Wesdome Gold and TGS Esports
The 3 months correlation between Wesdome and TGS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Wesdome Gold Mines and TGS Esports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TGS Esports and Wesdome Gold is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Wesdome Gold Mines are associated (or correlated) with TGS Esports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TGS Esports has no effect on the direction of Wesdome Gold i.e., Wesdome Gold and TGS Esports go up and down completely randomly.
Pair Corralation between Wesdome Gold and TGS Esports
Assuming the 90 days trading horizon Wesdome Gold Mines is expected to generate 1.54 times more return on investment than TGS Esports. However, Wesdome Gold is 1.54 times more volatile than TGS Esports. It trades about 0.0 of its potential returns per unit of risk. TGS Esports is currently generating about -0.04 per unit of risk. If you would invest 1,094 in Wesdome Gold Mines on September 1, 2023 and sell it today you would lose (253.00) from holding Wesdome Gold Mines or give up 23.13% of portfolio value over 90 days.
Over the last 90 days Wesdome Gold Mines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Wesdome Gold is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the insiders.
Over the last 90 days TGS Esports has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, TGS Esports is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
The main advantage of trading using opposite Wesdome Gold and TGS Esports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wesdome Gold position performs unexpectedly, TGS Esports can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in TGS Esports will offset losses from the drop in TGS Esports' long position.
The idea behind Wesdome Gold Mines and TGS Esports pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.
View history of all your transactions and understand their impact on performance
Macroaxis helps investors of all levels and skills to maximize the upside of all their holdings and minimize the risk
associated with market volatility, economic swings, and company-specific events. View terms and conditions